Oleg Yarovyi, a 29-year-old businessman from Kyiv, never planned to leave Ukraine. He and his wife Inna both used to work in the advertising business, owned an apartment and had lots of friends in the Ukrainian capital.
But after Inna was offered a job in Warsaw in 2015, the Yarovyis decided to move. Soon after settling in the Polish capital, they opened the Dobro & Dobro Espresso Bar, a small coffee shop.
“People like to come to a place where the owner makes coffee for them by himself,” Yarovyi told the Kyiv Post on April 25. “Plus, the name of our coffee shop wins the hearts of the clients. We promote the good Ukrainian temperament.”
Yarovyi said more Ukrainians are opening up businesses in Poland. In 2015, the Ukrainian Business Association in Poland was set up by 25 Ukrainian investors.
“Now it includes 48 companies, mostly large- and mid-sized business. We’re the only representatives from a small business there,” Yarovyi said.
Yaroslav Romanchuk, the president of Ukrainian Business Association in Poland, told the Kyiv Post on April 25 that since the 1990s, Polish businesspeople have invested 800 million euros in Ukraine’s economy, while Ukrainian investors, according to the official statistics, have pumped 56 million euros into Poland over the same period.
However, Romanchuk said that while the Polish government does everything it can to attract business — offering benefits, transparent procedures and even a simplified procedure to get a residence permit — the Ukrainian authorities still see business as a way to milk extra cash for themselves, not for the country.
Yaroslav Romanchuk, the president of the Ukrainian business Association in Poland. (Kostyantyn Chernichkin)
Piotr Ciarkowski, the president of the International Polish Business Association of Ukraine agreed, saying that Polish businesses are fed up with Ukraine’s corruption and unhealthy investment climate.
“Everybody keeps saying the situation has improved, but we haven’t noticed. The procedures for wringing money out of people just have become more complicated and hard,” Ciarkowski said.
This is continuing to damage the investment climate in Ukraine. While Polish businesses who have been in Ukraine for a long time have already learned how to navigate the challenges, some Polish newcomers are soon were forced to leave because of a lack of profits or greedy civil servants.
But the news isn’t all bad. In the 2017 Doing Business ranking, Ukraine rose by one point on 2016 and is now in 80th place among nations — far behind Poland, which ranks 24th.
According to the World Bank ranking, Ukraine has improved its protections for minority investors (rising from 101st in 2016 to 70th in 2017) and has become a more reliable business partner, jumping from 93rd place to 81st in enforcing contracts.
No problems
Yarovyi said all Ukrainians have to do to open a business in Poland is follow the law.
“You have to register a firm, choose the type of business and that’s it,” he said.
A business person also has to be able to speak Polish, know the territory he will operate in, and work under Polish law and the country’s tax payment system.
“We had no problems with any of that, but a businessman can always apply for help from lawyers and accountants,” he added.
Romanchuk was one of the first Ukrainian investors in Poland. In 2006 he opened the Warsaw office of his international law firm Eucon to help Polish potential investors enter the Ukrainian market. But he decided to reshape the work of his foreign office in 2014 after Ukraine signed the association agreement with the European Union.
“We understood that we have to help Ukrainian business enter the EU markets through Poland,” said Romanchuk.
A year after that, he came up with the idea of creating an association to protect the interests of Ukrainian investors on the highly competitive Polish market.
Romanchuk said the Ukrainian government used to accuse the association of helping capital move abroad.
“But that’s not true. Yes, we have had some businesses move completely to Poland, but most of our members opened branches of their companies in Poland while keeping their main offices in Ukraine,” said Romanchuk.
Moreover, he said, Ukrainian companies that open branches abroad, reinvest from 20,000 to 150,000 euros in Ukraine.
Ukrainian companies enter the Polish market by opening trade houses there. Romanchuk said by that businessmen do this to get closer to their potential customers, working directly with local retail chains rather than involving local traders as middlemen.
But the main goal is to get access to foreign capital. For the period from 2014 to 2020 the European Union is to provide 73 billion euros in aid for the Polish economy. The government will allocate part of that money to promote business.
Romanchuk said Polish local governments are very open to business, as they understand it provides new investments, jobs and contributes taxes. Financial aid programs in Poland are in place to encourage people, even foreigners, to set up businesses.
“An entrepreneur can get access to that money even if he is a foreign citizen,” said Romanchuk “The only demand is that he has to be registered as a legal entity in Poland. The government can even easily provide a resident permit for him.”
Romanchuk said most Ukrainian businesses in Poland work in the food industry, engineering, and IT sector.
“The Brovary Aluminum Smelter, Lviv’s Iskra Plant, sunflower oil producers and many others have been successfully operating in Poland,” Romanchuk said.
Unhealthy environment
Back in Ukraine, the International Polish Business Association of Ukraine includes about 80 firms working in various spheres of the economy: the service industry, goods production, construction, and insurance.
Despite the Ukrainian authorities’ declared efforts to make Ukraine more attractive to foreign investors, and its rise in the Doing Business ranking, Ciarkowski said that three years after the EuroMaidan Revolution nothing has really changed in Ukraine.
He said after Ukraine chose its European course, many had expected more and more Polish companies would enter Ukraine.
“But we’re not seeing crowds of newcomers. Unfortunately, Ukraine can’t compete with Poland and the rest of European Union in doing business. We have a lot more opportunities and benefits,” Ciarkowski said.
Trade has improved only by about 10 percent. It’s not only corruption, but also the unreliability of business partners here that is slowing down Ukraine’s development, Ciarkowski said.
“It is very hard to find reliable partners here. You can’t be sure that they will pay for your product in time — or pay at all. Plus, there is a lot of financial risks and no possibility to secure yourself against them.”
Ciarkowski is the general manager of construction company Bikor, which designs and constructs industrial premises. In Ukraine, the company oversaw the reconstruction of the Olympiyskiy Stadium before Euro 2012 soccer championship. It has been present on the Ukrainian market for 20 years.
Companies like Bikor have already learned how to operate on Ukraine’s unhealthy market, while newcomers frequently face fraudsters and unreasonable local authorities. Both factors force businesses to leave Ukrainian market.
Ciarkowski cited as an example the Polish international delivery company InPost, which in 2014 entered the Ukrainian market by setting up about 40 parcel lockers across Kyiv. Clients could collect goods bought via the internet from InPost lockers, the postal service being completely automatic.
However, in February the company decided to suspend its services in Ukraine. Ciarkowski said InPost couldn’t agree with the Kyiv authorities about places where they would be allowed to install parcel lockers. Moreover, locals kept vandalizing the equipment.
But InPost spokesperson Wojciech Kadziołka told the Kyiv Post on April 25 the company had decided to quite the Ukrainian market for just one reason — there’s too little money in it.
“The reason we left the Ukrainian market was purely business. The Western markets we operate in, such as Britain, France, and Italy, and of course Poland, are more profitable than the Ukrainian one. And we decided that we should focus primarily on those markets,” he said.
